Ad equivalency not dead; may be reincarnated

Interesting article in the March 12 issue of Marketing Magazine (Canada) on the ‘AVEs and the AVE nots’ which, encouragingly, presents a more complex view that is somewhat contrary to the popular view in the PR industry that advertising equivalencys should be dropped entirely.

Well it’s not that simple. Bottom line: as a stand-alone absolute metric it is indeed a silly measure, but the data CAN be useful if looked on and used properly and in the right relative context. Read on and give the arguement a chance.

Apologies for the long post (and the formatting), but as Marketing Mag’s content is subscription-only, I’ve cut ‘n pasted here…

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Marketing Magazine

March 12, 2007

The AVEs and AVE notsBy Paul-Mark RendonThough many PR pros say Ad Value Equivalency should be gone for good, a few voices in the PR wilderness say not so fastRemember this phrase the next time you find yourself in conversation with your friendly neighbourhood PR practitioner: Ad Value Equivalency. Go ahead and say it, shaking your head as you do, as if pooh-poohing an unwanted politician who’s somehow found a way to get re-elected.Then prepare for the deluge.

What you’ll likely hear is how AVEs simply need to be shown the door. They’ll say the long-held PR measurement process that equates the amount of editorial coverage a product, service or issue receives with what a marketer would have to spend in advertising dollars to reach the same audience is due for a big change. It’s antiquated, inaccurate, misleading and impossible to standardize.

And regardless of where you hear these criticisms, they’ll largely be the same. In the U.S., the Institute of Public Relations created a commission to look at PR measurement. Its discussion paper states the basic conceptual problem with AVEs: “Calling it ‘advertising equivalency’ strongly suggests that a news story of a particular size has an equal impact to an advertisement of the same size in that publication. At this time, the commission knows of no factual basis for this assumption.”

Closer to home, the Canadian Public Relations Society last year went through the pain of birthing a completely new system-Media Relations Ratings Points-that omits ad value equivalency because of its lack of substance. “Ad values are increasingly seen by the public relations industry as an outdated and ineffective tool that does not accurately measure the value of editorial coverage,” the CPRS measurement committee said at the launch. The MRP system has already been taken up by Canadian marketers including the Bank of Montreal, Coca-Cola, Johnson & Johnson and Visa Canada. In the meantime, AVEs continue to see their reputation swept into the PR gutter.

But among PR and media measurement folk, there are those who say AVEs are worth keeping around. “We know what’s wrong with the metric and how it’s been used in the past,” says Angela Jeffrey, vice-president of editorial research for New York-based Video Monitoring Services of America, one of the largest providers of media intelligence in the U.S. “But don’t throw the baby out with the bathwater. There’s value to the data itself-it just has to be used differently.”

Jeffrey, who is also a member of the IPR commission on PR measurement and evaluation, and who is in the process of completing a white paper on ad values, says the term needs to change, since there’s no impact equivalency between advertising and editorial. Her research has shown that compared to other metrics such as story counts and straight impressions, media values-a refined version of AVEs-register the highest correlations with business outcomes. “We’ve found that if you start with that (AVE) figure and refine it further by qualitative factors such as slant and prominence, you get a whale of an accurate metric when comparing media coverage to business outcomes,” she says.

Jeffrey, whose team helped compile more than 200 studies and 10 million media clips over the past five years, says media values can be up to12.5% more accurate than audience impressions. And compared to simple story counts, they can be 25% more accurate. AVEs, she concludes, are not ready for the dustbin.

Like Jeffrey, Andrew Laing, president of Toronto’s Cormex Research, a media content and measurement analysis firm, says AVEs are worth considering, but only in the proper light. “As a measurement criteria, (AVEs are) really awful,” he says. “But there are instances in which they can be useful, and it comes down to when you’re assessing equally comparable products or services, and you want to measure them in a way that assesses the relative market value (of media coverage) of one product over another.”

As an example, Laing cites companies like Bell and Rogers, which have competing high-speed Internet services. A proper use of AVEs in that case would be to measure the AVEs for each in a given period of time, and come up with a percentage, not a dollar figure. “You can say that within the last quarter, the relative market value of Bell’s (media coverage), for instance, has been twice that, or 20% greater than that of Rogers, and that’s an improvement over the previous quarter by X%. But what you’re not doing is saying, Bell’s coverage is worth a million bucks. It’s not an absolute, but a good indicator of relative value over time.”

Laing also points out that for many areas, AVEs simply do not have the capacity to deliver, such as their inability to measure instances where the marketer’s goal is zero publicity. Too many PR practitioners fall into the AVE trap because they want to put dollar figures on their ad values in an attempt to talk the C-Suite’s language. CEOs and CMOs who may not be familiar with PR measurement still understand AVEs for their dollar value, even though those values may only be half-baked and don’t paint a true picture of the media coverage’s impact.

Jeffrey says those C-suite executives should always ask follow-up questions, such as where and when editorial coverage ran. A five-second TV blip at 3 a.m. will likely not come close to the stated audience size, for example, while an inch of newspaper coverage may only be worth $100, not the $50,000 it would have cost to buy an ad the size of the entire story. “I think there are a lot of people out there who intuitively know there’s something valid about looking at objective, market-driven data,” she says.

AVEs have provided that in the past, so it isn’t necessary to start from scratch, just shift perspective. “It’s very important that we not lose this valuable database just because it’s not popular anymore,” she says. “We can’t afford to give our clients inferior data just because certain people out there don’t like it.”

Global calculations

One year after the Canadian Public Relations Society released its Media Relations Ratings Points (MRP) system, the PR measurement tool is being increasingly used from coast to coast. And while many PR agencies outside of the country have heard of MRP, this made-in-Canada solution may end up being a just-in-Canada solution. An MRP-type system might one day become a best practice in Mexico, but not any time soon, says Antonio Tamayo, president of Hill & Knowlton in Mexico. The media landscape in Mexico is still very different from that of Canada, he says. For instance, in a country of 104 million, there is only a distribution of 2.5 million daily newspapers, and TV and magazine reach is limited. Radio plays a huge role in getting messages across to Mexicans, and the Internet is also playing a bigger role. But a system like MRP, says Tamayo, is far too expensive to work in Mexico and would be of limited value. Tamayo says perception studies will be the way PR is measured in Mexico for years to come. Renata Monte Alegre, general manager of Hill & Knowlton Brazil, says PR measurement is an issue in Brazil as well, but no system like MRP exists. H&K Brazil relies on monthly quantitative and qualitative clipping reports, which consider the media, the tone and whether the coverage was spontaneous, from the account team or a press release. Those findings are then compared with the original communications plan. But traditional ad value is still often used, she says. “Although we also feel that this tool is far from appropriate, some clients still ask us to provide an ad value report of all clippings gathered.” European PR shops are using MRP-like tools, but developing them on their own, says Laura Currie, who spent three years running Edelman’s Brussels office and is now senior VP of corporate and public affairs at Edelman Toronto. “Europeans are doing very much the same things. The parameters are very similar,” she says. It’s not as formal as the MRP, but it has the same basis. The big difference is that instead of being a standardized open system, each agency uses its own proprietary tools. She doubts there will ever be a standardized European system, a sentiment echoed by Richard Ingles, managing director of MB Precis, a London, U.K.-based media content analyst. “Each agency has their own customer bases, their own methodology,” he says. “Where is the incentive to give them up? Your objective is revenue.” An agency’s methodology is its key edge over competitors, he argues. A standardized system would trump that, although Ingles does say it would allow for better benchmark comparisons and more objective reports. Meanwhile a multinational system is highly unlikely in Asia, says Glenn Schloss, Hill & Knowlton’s Hong Kong director of corporate communications. Much of the continent is made up of developing markets and PR budgets are limited, he says. There isn’t yet the same level of sophistication for PR programs, let alone measurement. Clients in Asia are cost conscious and want value from every activity, he adds. “There is often a focus on short-term or even instant results.” Language also complicates measurement, since unlike in Europe or the Americas, which at least have a common alphabet, Asian PR measurement has to contend with entirely different script systems from one country to the next. And while H&K tries to dissuade the practice, Schloss says many clients still ask for AVEs.-Eric Ahlberg

Q&A

Mark Weiner, president of Norwalk, Connecticut-based PR firm Delahaye and author of Unleashing the Power of PR, spoke to Marketing senior writer Paul-Mark Rendon about why he’s an ad value equivalency moderate, as well as why it’s right to put a dollar value on PR ROI

What are advertising values’ redeeming qualities? I think ad values provide a qualified look at PR performance. This is the dilemma: it’s a polarizing issue, where the most outspoken are the opponents, and yet, probably 70% of all PR people either use ad values or have used ad values. What’s the biggest reason ad values don’t work? An advertiser would never pay the rate card rate for advertising-it’s heavily negotiated. All you have to do is talk to the advertising sales guys at any magazine, and they probably feel pretty good if they get the rate card rate for any big advertising. In that way (because ad values are based on advertising rates), they’re often inflated. They’re also, unfortunately, misused too often, where stories that are negative in tone are attributed in ad value. Nobody would ever pay for that. So the proper way to use ad value is to first figure out media costs? But that’s difficult to find out unless you’re in the media buying business. Because it’s so heavily negotiated and whatever ends up being negotiated is always a trade secret. So it’s only a partial measure as far as you can figure out the prominence of the medium, the length of the story. Those are things that equate, but people misuse it by applying ad values to negative news, or applying a multiplier. Research has been done to suggest that there is no multiplier effect at all. Some say that applying the term ROI to PR is a misnomer because there isn’t any revenue generated. That’s false. There are three ways we define ROI. One is avoiding catastrophic cost as a way to keep money within the organization. Another is doing more with less: being more targeted with press releases, talking to journalists who really matter versus ones who don’t. The third is about generating revenue through PR through market-mix modelling, which looks at sales activity within a given market, within a given time frame, and then examines the marketing that was present during that time and place, and then comparing market to market, week to week. These fluctuations start to reveal patterns as to what’s working and what’s not. But can you measure that? Yes you can. A few years ago Firestone and Ford got into a big fight over tires blowing out in Texas. That story was escalated through the news, and because Ford and Firestone chose to fight it out through the media, the market capitalization of those two companies was dramatically affected. Ford’s dropped by 40%, and Firestone’s dropped by 50%. Those are tens of billions of dollars that were lost to investors because of those companies’ inability to communicate effectively-to have a crisis plan and carry it out. We’ve documented the value of a proper response during a negative news situation where a company knew it was going to miss earnings and the CEO wanted to know the best course of action. The legal team told him to stay quiet. The corporate communications team told him he needed to get out in front of the story. And we looked at six companies from the same category, each of which had missed earnings. We found that three that were proactive and in front fared much better than those who took the lawyers’ advice. In the first five or 10 days, everybody’s news coverage was negative and their stock price dropped. But after that, the companies that responded in an open and transparent way saw their stock price rebound to the point where by the end of the year they had improved by a net of 12%. The companies who chose not to respond saw no improvement. Some never recovered. So the market cap implications are serious.

Alan – thanks for including this story on your blog! I hadn’t seen it yet, since Paul-Mark is snail-mailing me a copy.

Just one comment to clarify Mark Weiner’s concerns with finding appropriate negotiated Media Values (our term for this controversial data, since there is no such thing as an ‘equivalency.’) The magic supplier is SQAD Inc., which compiles more than $7 billion of actual media buys from the major agencies nationwide, and figures out what folks are REALLY paying for TV and Radio spots in every time period, every quarter, for every one of the 210 US DMAs plus nationally, and also for Internet banners.

SQAD then projects costs five quarters forward, and all the media buyers subscribe to this database to get the benchmarks against which to negotiate. Neil Klar, president of SQAD, says the SQAD cost-per-point database essentially provides buyers with “true value” costs.

Anyway, we at VMS use SQAD data for all TV, Radio and Internet media values, and at least one other industry supplier does as well. While negotiated rates aren’t yet available for print, I am sure they will be at some point. Regardless, we believe it is the precision of the SQAD data that has helped revealed the strong correlations between media coverage and business outcomes. And isn’t that the objective? To see the results of our work? I’d think that would trump any ‘attitude’ one has towards any given metric, any day of the week.

Indeed using negotiated advertising rates is a step in the right direction. Finding the data is tricky. After having seen one of your webcasts about a year back I approached SQAD to see if they provided Canadian data and, at least at that point, they didn’t. I may check back with them again. I am aware of some instances where organizations use data from media buyers, but what’s missing is industry-wide, consisten, centralized, SQAD-like data in Canada.

Also, I have a soft copy of the article from Infomart. I’ll send it to you directly via e-mail.